Budget 2011 - update
The Chancellor announced the latest budget on 23 March 2011. Here’s our summary of the main changes:
Business
- Corporation tax will be cut by an additional 1% – from April 2011 the high rate of corporation tax will be reduced from 28% to 26%. Northern Ireland received a special mention – the Treasury is due to release a paper today relating to decreasing our Corporation tax rate in line with the Republic of Ireland (12.5%).
- Research & Development tax credits have been increased from 175% to 200%, effective April 2011, rising to 225% in April 2012. If your company qualifies for this relief, it will now be able to claim double tax relief on qualifying expenditure.
- The limit on Capital allowances for short life assets has been doubled from 4 years to 8 years – great news for those companies investing in the latest automated plant and machinery.
- The Business Rate holiday for SMEs has been extended for another year.
- Local Enterprise Zones were announced for England, providing Rates exemptions, provision of Broadband services etc. Northern Ireland may benefit from similar zones, but this will be determined by the NI Assembly.
Personal
- Personal allowances (amount that can be earned tax free) will be been increased, from £7,475 to £8,010 (2012-13). However, the Chancellor balanced his books by decreasing the basic rate band by an equivalent amount. Effectively, the amount at which you start to pay higher rate tax will remain unchanged over the next 2 years.
- Employee & Employer National Insurance rates to increase by 1%.
- Fuel duty to be cut by 1p / litre.
Investors / Capital Gains Tax
- The Enterprise Investment Scheme (EIS) has been a great vehicle to stimulate private investment in the SME sector.
In 2008-09, an estimated 2,000 businesses received £503m in investment through this scheme.
It has been given a boost by increasing income tax breaks for investors from 20% to 30%, and the maximum annual limit has been doubled to £1m per annum. The tests for qualifying companies have also been substantially relaxed.
- Venture Capital Trust relief (VCT) – this relief has remained unchanged, although the qualifying conditions for companies have been substantially relaxed to encourage more investment.
- The Entrepreneur’s Relief has been doubled from £5m to £10m – great news for entrepreneurs wishing to dispose of their business assets.
Inheritance tax
- The main change from this year’s budget relates to a cut in the main rate from 40% to 36%, if 10% of the Estate has been left to Charities.
If you would like to discuss this article, please contact Nigel Morrow.
